Quicken rental property manager is what I use, but find that it is not Australian specific.
but it goes a reasonable job for data entry of income/expenses with categorizations.
Interested to know of any other software though as I’m sure there must be better ones out there.

Hi Richard,

Thanks for your reply, but can you provide an explanation why you think my set up is so wrong?

To recap, I have it as:

• LOC (100% investment use) – used to pay deposit for IP#1 and IP#2. Interest capitalised.
• Transaction Account (100% investment use) – All rental income in, All deductable expenses out (interest repayments for IP(s), strata, water, management fees…etc)
• Loan IP#1 – Interest Only
• Loan IP#2 – Interest Only

I'm very glad you posted this example as this is exactly how I setup my loans when I started purchasing IP's recently.

However, I've got some follow up questions:

1) Currently my LOC (secured by the PPOR) interest is being capitalised, is this correct or should I instruct my bank to pay the interest for these capital expenses from one of my other Investment Transaction accounts?

2) Debt Recycling

(a) When my IP's gain equity and I go back to my Lender to pull out additional funds will I simply retain the same loan account but the amount increases or will I have to keep creating new loan accounts everytime I take out i pull out more equity?

(b) Once I have access to these additional funds, should I be dumping the lump-sum and 'reimburse' back the LOC account which I used to pay the initial deposit/acquisition costs, thus lowering the balance and the debit interest charges?

I also did this about a month ago based on advice from my mortgage broker.

I had all my savings in my offset account against my PPOR but since an opportunity came up and I hadn't had the time yet to restructure my PPOR loan with a LOC to draw on the equity, I moved the funds from Offset –> PPOR Home Loan then performed a redraw immediately to pay for the deposit….this had a $0 balance difference by day's end (when I presume they calculate interest)

….but then now I'm thinking, hang on… the debit interest charged against my PPOR Home Loan account, still only represents 100% my personal PPOR loan debt. Where is the benefit of performing all this where I can tax deduct also the deposit interest?

Now that I have my LOC setup, am I supposed to reimburse my Offset account with the funds available from the new LOC? and therefore now the LOC Debit Interest is deductible?

My buyer's agent organized a new policy for me a policy via EBM, Seems to be ok. $285 for a Victoria 2 Bedroom Unit.

Are EBM (Insurance Brokers) similar to how Mortgage Brokers kind of operate? In that they will search a number of deals for you then present the best one to you which suits your needs then you deal with the company then directly? 

I ask because it seems like my policy is direct with EBM itself and deal with them directly unlike a mortgage loan after the initial setup you pretty much deal with the bank itself.

Does that sound right?

Not really, but he was explaining how he thought was best to restructure my loans/accounts I had.

He did make some comments regarding not to use my money directly to pay for expenses from my PPOR Offset account for Investment purposes directly as it wouldn't then be tax deductible. Then gave me the advice to use all the life savings I have been parking there to pay down my loan and then take out the equity via a separate LOC account which I can then use soley for investment purposes. Seemed to make sense.

Yes. I'm with CBA, so the Offset account (aka. MISA) against my PPOR is somewhat useless to use as a normal day to day transaction account.

Plus it contains a whole bunch of savings from both myself and my wife jointly.

My little hobby of property investment i'm trying now to decouple and just do on my own with my own funds/salary and properties under my name only.

My normal transaction account is just what I use on a day to day basis for like lunch, coffees, petrol and other life's what nots.

Yes to minimise the non deductability I would agree with you, but if the PPOR offset account gets mixed with my income, rental property income, wife's salary plus everything, it just gets messy (for us anyway). Every month my wife and I are just diligently transfer a lump sum of whatever we don't need from our own transaction accounts into there.

2 LOC's came about because:

a) PPOR – described above. life savings against PPOR offset, used to split out PPOR loan. This is in joint names

b) IP#1 (solely under my name) – was refinanced from original lender to new lender and revaluation enabled equity to be taken out, new LOC was opened in the hope to finance a 3rd and 4th IP.

That was just a thought that popped into my head (thats why I listed it as Option 2) while trying to figure this whole web of accounts out and how to use them properly. But I highlighted it as it didn't seem like the right way to go about it, or if it was legal to do. Hence my early post raising the question which you have clarified.

Would anyone ever use a Line of Credit to pay off monthly loan repayment interests instead of taking it out of a normal transaction/savings/offset account? or will the banks somehow not really allowed because it too is 'borrowed' funds?

For example:

Property A – Loan – Monthly interest charges $111.11

Property A – LOC – $100,000 limit available

Property B – Loan – Monthly interest charges $222.22

Property C – Loan – Monthly interest charges $333.33

Therefore the LOC against property A with the high limit is treated as the "master" account where we normally pay for the utilities, bills, etc. can also be used to pay the Loan Interest repayments on Property A, B and C's loans? or would people normally just treat each one separate and use a standard transaction/savings/offset account to make payments to all 4 accounts directly?  

Of course, keeping in mind trying to maximise deductibility and all that too.

FMS wrote:

If you accesed the 100k equity your loan would increase to 300k and your offset account would have 160k in it so interest would be calculated on the difference being 140k making no difference

Yes – of course! Silly me! How did I miss that. Totally embarrasing.

Ok so that would mean that the interest calculation would be the same (assuming that the new LOC rates are the same as the Loan/Offset one)

My intended purpose of the 100k available equity in the IP (solely under my name) is to use it to grow my portfolio and buy more IP's along with pay for any expenses which that might incur in doing so such as buyer agency, deposits, building & pest inspections, loan setup fees and then later for the ongoing fees like utilities, borrowing fees, interests etc.

Yes I also do have a PPOR (shared with my wife) worth about $800,000 and a current loan balance of $600,000 with about $200,000 (cash of mine) in its offset account which I have been saving over time. The only reason I parked the money there was to lower the interest repayments while I figured out my next move. That is where my mortgage broker als othen suggested I do the same here on my PPOR. That is, use the $200,000 life-savings to pay down my home loan to $400,000 and then open up a Line of Credit for $200,000 against my PPOR to be used for Investment purposes.

Originally, I was trying to keep the accounts in my PPOR separate so that it wouldn't mess up anything with our own joint situation or affect my wife tax, accounts or what not while I continue to play with my little side hobby of property investing. However, of course, like everyone I'd like to minimize my non-deductable interest payments and maximise my deductable interest payments in the best structure possible without breaching any laws.